Knight Frank is planning to float a new £600m European property investment fund.
The agency’s private equity arm, Rutley Capital Partners, is seeking to raise £200m from a share placing on the main London stock market in the coming weeks.
Gearing of two parts debt to one part equity brings the fund to £600m for investment in the European market which has been the target of an array of international investors from the US and UK.
Rutley European Property Limited (REPL), which will be listed on the London and on the Channel Islands Stock Exchange, is currently a private company based in Guernsey and owned mainly by institutional investors.
REPL targets commercial property in Germany, Switzerland, Belgium the Netherlands and central Europe, and has recently bought or put under offer 12 properties worth £108m in Germany and Poland.
It is in the process of acquiring additional properties for around £167m in Poland, the Czech Republic and Belgium, with an overall yield on the portfolio, most of which was sourced off-market, of 6.84%.
The proceeds of the offer of 200m C shares at 100p each will be held as a separate pool until they have been at least 75% invested in properties to avoid dilution to the existing shareholders.
A further £455m of property has been identified as acquisition targets for the C share pool, with the gross annual yield of these properties ranging between 6% and 7.5%.
REPL expects to invest the whole of the portfolio by the summer of next year.
Under the group’s structure the eventual portfolio would be gradually wound down between 2010 and 2013, with properties sold and the proceeds distributed to shareholders.
Nick Burnell, partner of Rutley Capital Partners, said: “Investment in the European real estate market has grown substantially over the last decade as transparency and access to markets has improved.
“Growth has been fuelled by low costs of borrowing throughout the continent and increasing focus upon the resilient performance of the property sector in contrast to the volatility of the equities market.
“The ten new EU member states continue to be drivers of growth with GDP levels considerably higher than within the traditional European hegemony.
“Following a poor performance in 2005, many of the new accession countries’ growth rates are expected to rebound in 2006 reflecting the improving market conditions across the region.
“Properties will be selected and acquired through a “bottom up” research based approach that seeks to understand the value of properties, as opposed to their market prices, so as to exploit property market imperfections.”
Cenkos Securities and Knight Frank Corporate Finance are placement agents on the fund.
References: EGi News 06/11/06
